SVB Financial Group
SVB FINANCIAL GROUP (Form: 10-Q, Received: 11/08/2017 16:32:11)
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
  (Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         .
Commission File Number: 000-15637  
SVB FINANCIAL GROUP
(Exact name of registrant as specified in its charter)
  
Delaware
 
91-1962278
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3003 Tasman Drive, Santa Clara, California
 
95054-1191
(Address of principal executive offices)
 
(Zip Code)
(408) 654-7400
(Registrant’s telephone number, including area code) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer         x              Accelerated filer         ¨     
Non-accelerated filer         ¨      (Do not check if a smaller reporting company)
Smaller reporting company          ¨          Emerging growth company         ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x
At October 31, 2017 , 52,740,729 shares of the registrant’s common stock ($0.001 par value) were outstanding.


Table of Contents

TABLE OF CONTENTS
 
 
 
Page
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 

2

Table of Contents

Glossary of Acronyms that may be used in this Report

AFS— Available-for-Sale
APIC— Additional Paid-in Capital
ASC— Accounting Standards Codification
ASU— Accounting Standards Update
CET— Common Equity Tier
EHOP— Employee Home Ownership Program of the Company
EPS— Earnings Per Share
ERI— Energy and Resource Innovation
ESOP— Employee Stock Ownership Plan of the Company
ESPP— 1999 Employee Stock Purchase Plan of the Company
FASB— Financial Accounting Standards Board
FDIC— Federal Deposit Insurance Corporation
FHLB— Federal Home Loan Bank
FRB— Federal Reserve Bank
FTE— Full-Time Employee
FTP— Funds Transfer Pricing
GAAP— Accounting principles generally accepted in the United States of America
HTM— Held-to-Maturity
IASB— International Accounting Standards Board
IPO— Initial Public Offering
IRS— Internal Revenue Service
IT— Information Technology
LIBOR— London Interbank Offered Rate
M&A— Merger and Acquisition
OTTI— Other Than Temporary Impairment
SEC— Securities and Exchange Commission
SPD-SVB— SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China)
TDR— Troubled Debt Restructuring
UK— United Kingdom
VIE— Variable Interest Entity

3

Table of Contents

PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
(Dollars in thousands, except par value and share data)

September 30,
2017

December 31,
2016
Assets




Cash and cash equivalents

$
3,555,571


$
2,545,750

Available-for-sale securities, at fair value (cost of $12,584,564 and $12,588,783, respectively)

12,603,337


12,620,411

Held-to-maturity securities, at cost (fair value of $11,023,415 and $8,376,138, respectively)

11,055,006


8,426,998

Non-marketable and other securities

627,469


622,552

Total investment securities

24,285,812


21,669,961

Loans, net of unearned income

22,189,327


19,899,944

Allowance for loan losses

(249,010
)

(225,366
)
Net loans

21,940,317


19,674,578

Premises and equipment, net of accumulated depreciation and amortization

122,826


120,683

Accrued interest receivable and other assets

849,761


672,688

Total assets

$
50,754,287


$
44,683,660

Liabilities and total equity




Liabilities:




Noninterest-bearing demand deposits

$
36,862,021


$
31,975,457

Interest-bearing deposits

7,950,012


7,004,411

Total deposits

44,812,033


38,979,868

Short-term borrowings

4,840


512,668

Other liabilities

990,498


618,383

Long-term debt

749,618


795,704

Total liabilities

46,556,989


40,906,623

Commitments and contingencies (Note 12 and Note 15)





SVBFG stockholders’ equity:




Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding




Common stock, $0.001 par value, 150,000,000 shares authorized; 52,723,654 shares and 52,254,074 shares outstanding, respectively

53


52

Additional paid-in capital

1,294,499


1,242,741

Retained earnings

2,749,627


2,376,331

Accumulated other comprehensive income

15,634


23,430

Total SVBFG stockholders’ equity

4,059,813


3,642,554

Noncontrolling interests

137,485


134,483

Total equity

4,197,298


3,777,037

Total liabilities and total equity

$
50,754,287


$
44,683,660


See accompanying notes to interim consolidated financial statements (unaudited).

4

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 

Three months ended September 30,

Nine months ended September 30,
(Dollars in thousands, except per share amounts)

2017

2016

2017

2016
Interest income:








Loans

$
268,445


$
214,227


$
745,983


$
617,456

Investment securities:








Taxable

109,443


83,468


294,768


261,121

Non-taxable

1,172


522


2,703


1,693

Federal funds sold, securities purchased under agreements to resell and other short-term investment securities

6,211


2,196


16,670


5,793

Total interest income

385,271


300,413


1,060,124


886,063

Interest expense:








Deposits

2,304


1,535


6,218


3,984

Borrowings

8,993


9,717


27,243


28,161

Total interest expense

11,297


11,252


33,461


32,145

Net interest income

373,974


289,161


1,026,663


853,918

Provision for credit losses (1)

23,522


20,004


70,062


90,225

Net interest income after provision for credit losses

350,452


269,157


956,601


763,693

Noninterest income:








Gains on investment securities, net

15,238


23,178


48,838


41,764

Gains on equity warrant assets, net (2)

24,922


21,558


42,432


33,253

Foreign exchange fees

29,671


25,944


82,026


76,998

Credit card fees

20,270


18,295


56,099


49,226

Deposit service charges

14,508


13,356


43,046


39,142

Client investment fees

15,563


7,952


37,571


23,959

Lending related fees

15,404


8,168


32,874


23,783

Letters of credit and standby letters of credit fees

7,306


6,811


20,951


18,414

Other (2)

15,896


18,878


41,128


36,511

Total noninterest income

158,778


144,140


404,965


343,050

Noninterest expense:








Compensation and benefits

153,263


136,568


449,412


374,410

Professional services

32,987


23,443


86,331


67,959

Premises and equipment

18,937


16,291


53,753


47,861

Net occupancy

12,660


9,525


35,437


28,919

Business development and travel

10,329


8,504


30,913


30,077

FDIC and state assessments

8,359


7,805


26,354


21,624

Correspondent bank fees

3,162


3,104


9,770


9,469

Other

18,064


15,533


54,670


44,292

Total noninterest expense (1)

257,761


220,773


746,640


624,611

Income before income tax expense

251,469


192,524


614,926


482,132

Income tax expense (3)

97,351


76,877


220,412


195,508

Net income before noncontrolling interests

154,118


115,647


394,514


286,624

Net income loss attributable to noncontrolling interests

(5,498
)

(4,566
)

(21,218
)

(3,405
)
Net income available to common stockholders (3)

$
148,620


$
111,081


$
373,296


$
283,219

Earnings per common share—basic (3)

$
2.82


$
2.13


$
7.11


$
5.46

Earnings per common share—diluted (3)

2.79


2.12


7.01


5.42

 
 
(1)
Our consolidated statements of income for the three and nine months ended September 30, 2016 were modified from prior period's presentation to conform to the current period's presentation, which reflects our provision for loan losses and provision for unfunded credit commitments together as our “provision for credit losses”. In prior periods, our provision for unfunded credit commitments were reported as a component of noninterest expense.
(2)
Our consolidated statements of income for the three and nine months ended September 30, 2016 were modified from prior period's presentation to conform to the current period's presentation, which reflects a new line item to separately disclose net gains on equity warrant assets. In prior periods, net gains on equity warrant assets were reported as a component of gains on derivative instruments, net. We removed the line item gains on derivative instruments, net and reclassified all other gains on derivative instruments, net to other noninterest income.
(3)
Included in income tax expense, net income available to common shareholders, earnings per common share-basic and earnings for common share-diluted, for the three and nine months ended September 30, 2017, are tax benefits recognized associated with the adoption of Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting in the first quarter of 2017. This guidance was adopted on a prospective basis with no change to prior period amounts.

See accompanying notes to interim consolidated financial statements (unaudited).

5

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 

Three months ended September 30,

Nine months ended September 30,
(Dollars in thousands)

2017

2016

2017

2016
Net income before noncontrolling interests

$
154,118


$
115,647


$
394,514


$
286,624

Other comprehensive income (loss), net of tax:








Change in cumulative translation gains (losses):








Foreign currency translation gains (losses)

1,928


(119
)

4,463


(2,168
)
Related tax (expense) benefit

(787
)

50


(1,821
)

885

Change in unrealized gains (losses) on available-for-sale securities:








Unrealized holding gains (losses)

925


(54,204
)

(12,471
)

157,564

Related tax (expense) benefit

(429
)

21,932


5,207


(64,357
)
Reclassification adjustment for losses (gains) included in net income

101


15


(384
)

(11,567
)
Related tax (benefit) expense

(41
)

(6
)

157


4,707

Amortization of unrealized gains on securities transferred from available-for-sale to held-to-maturity

(1,594
)

(1,690
)

(4,931
)

(6,507
)
Related tax benefit

641


680


1,984


2,618

Other comprehensive income (loss), net of tax

744


(33,342
)

(7,796
)

81,175

Comprehensive income

154,862


82,305


386,718


367,799

Comprehensive income attributable to noncontrolling interests

(5,498
)

(4,566
)

(21,218
)

(3,405
)
Comprehensive income attributable to SVBFG

$
149,364


$
77,739


$
365,500


$
364,394


See accompanying notes to interim consolidated financial statements (unaudited).

6

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
 
 

Common Stock

Additional
Paid-in Capital

Retained Earnings

Accumulated
Other
Comprehensive Income

Total SVBFG
Stockholders’ Equity

Noncontrolling Interests

Total Equity
(Dollars in thousands)

Shares

Amount






Balance at December 31, 2015

51,610,226

 
$
52

 
$
1,189,032

 
$
1,993,646

 
$
15,404


$
3,198,134


$
135,097


$
3,333,231

Common stock issued under employee benefit plans, net of restricted stock cancellations

408,044

 

 
8,661

 

 


8,661




8,661

Common stock issued under ESOP

43,165

 

 
4,328

 

 


4,328




4,328

Income tax effect from stock options exercised, vesting of restricted stock and other (1)


 

 
(6,300
)
 

 


(6,300
)



(6,300
)
Net income


 

 

 
283,219

 


283,219


3,405


286,624

Capital calls and distributions, net


 

 

 

 




(8,236
)

(8,236
)
Net change in unrealized gains and losses on AFS securities, net of tax


 

 

 

 
86,347


86,347




86,347

Amortization of unrealized gains on securities transferred from AFS to HTM, net of tax


 

 

 

 
(3,889
)

(3,889
)



(3,889
)
Foreign currency translation adjustments, net of tax


 

 

 

 
(1,283
)

(1,283
)



(1,283
)
Share-based compensation, net


 

 
23,834

 

 


23,834




23,834

Balance at September 30, 2016

52,061,435


$
52


$
1,219,555


$
2,276,865


$
96,579


$
3,593,051


$
130,266


$
3,723,317

Balance at December 31, 2016

52,254,074


$
52


$
1,242,741


$
2,376,331


$
23,430


$
3,642,554


$
134,483


$
3,777,037

Common stock issued under employee benefit plans, net of restricted stock cancellations

458,742

 
1

 
14,191

 

 


14,192




14,192

Common stock issued under ESOP

10,838

 

 
2,094

 

 


2,094




2,094

Income tax effect from stock options exercised, vesting of restricted stock and other (1)
 

 

 

 

 

 

 

 

Net income


 

 

 
373,296

 


373,296


21,218


394,514

Capital calls and distributions, net


 

 

 

 




(18,216
)

(18,216
)
Net change in unrealized gains and losses on AFS securities, net of tax


 

 

 

 
(7,491
)

(7,491
)



(7,491
)
Amortization of unrealized gains on securities transferred from AFS to HTM, net of tax


 

 

 

 
(2,947
)

(2,947
)



(2,947
)
Foreign currency translation adjustments, net of tax


 

 

 

 
2,642


2,642




2,642

Share-based compensation, net


 

 
35,473

 

 


35,473




35,473

Balance at September 30, 2017

52,723,654


$
53


$
1,294,499


$
2,749,627


$
15,634


$
4,059,813


$
137,485


$
4,197,298

 
(1)
During the first quarter of 2017 we adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU require that all excess tax benefits and tax deficiencies associated with share-based compensation be recognized in income tax expense or benefit in the income statement. Previously, tax effects resulting from changes in the Company's share price subsequent to grant date of share-based compensation awards were recorded through additional paid-in-capital in stockholders' equity at the time of vesting and exercise. This guidance was adopted on a prospective basis with no change to prior period amounts. See Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details.





  See accompanying notes to interim consolidated financial statements (unaudited).

7

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 

Nine months ended September 30,
(Dollars in thousands)

2017

2016
Cash flows from operating activities:




Net income before noncontrolling interests

$
394,514


$
286,624

Adjustments to reconcile net income to net cash provided by operating activities:




Provision for credit losses

70,062


90,225

Changes in fair values of equity warrant assets, net of proceeds from exercises

(29,666
)
 
(20,505
)
Changes in fair values of derivatives, net

8,214


(4,370
)
Gains on investment securities, net

(48,838
)

(41,764
)
Depreciation and amortization

39,265


35,114

Amortization of premiums and discounts on investment securities, net

2,609


9,622

Amortization of share-based compensation

27,739


22,342

Amortization of deferred loan fees

(81,060
)

(72,807
)
Deferred income tax benefit

2,325


(6,839
)
Gain from sale of equity valuation services business
 
(2,393
)
 

Excess tax benefit from exercise of stock options and vesting of restricted shares (1)
 
(14,399
)
 

Changes in other assets and liabilities:




Accrued interest receivable and payable, net

(26,092
)

1,169

Accounts receivable and payable, net

4,120


(12,872
)
Income tax receivable and payable, net

30,069


13,181

Accrued compensation

(11,731
)

(48,740
)
Foreign exchange spot contracts, net

86,911


1,803

Other, net

16,383


20,821

Net cash provided by operating activities

468,032


273,004

Cash flows from investing activities:




Purchases of available-for-sale securities

(2,420,741
)


Proceeds from sales of available-for-sale securities

7,311


2,879,409

Proceeds from maturities and pay downs of available-for-sale securities

2,434,039


1,002,523

Purchases of held-to-maturity securities

(3,812,782
)

(225,526
)
Proceeds from maturities and pay downs of held-to-maturity securities

1,283,764


1,206,367

Purchases of non-marketable and other securities

(18,713
)

(41,925
)
Proceeds from sales and distributions of non-marketable and other securities

88,809


54,420

Net increase in loans

(2,263,600
)

(2,365,640
)
Purchases of premises and equipment

(35,470
)

(37,184
)
Proceeds from sale of equity valuation services business
 
3,000

 

Net cash (used for) provided by investing activities

(4,734,383
)

2,472,444

Cash flows from financing activities:




Net increase (decrease) in deposits

5,832,165


(953,360
)
Net decrease in short-term borrowings

(507,828
)

(772,479
)
Principal payments of long-term debt
 
(46,235
)
 

(Distributions to noncontrolling interests), net of contributions from noncontrolling interests

(18,216
)

(8,236
)
Tax effect from stock exercises (1)



(6,300
)
Proceeds from issuance of common stock, ESPP and ESOP

16,286


12,989

Net cash provided by (used for) financing activities

5,276,172


(1,727,386
)
Net increase in cash and cash equivalents

1,009,821


1,018,062

Cash and cash equivalents at beginning of period

2,545,750


1,503,257

Cash and cash equivalents at end of period

$
3,555,571


$
2,521,319

Supplemental disclosures:




Cash paid during the period for:




Interest

$
41,324


$
39,317

Income taxes

190,706


186,474

Noncash items during the period:




Changes in unrealized gains and losses on available-for-sale securities, net of tax

$
(7,491
)

$
86,347

Distributions of stock from investments

5,360


750

 
(1)
During the first quarter of 2017 we adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. This guidance was adopted on a prospective basis with no change to prior period amounts. See Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details.

See accompanying notes to interim consolidated financial statements (unaudited).

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Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.
Basis of Presentation
SVB Financial Group is a diversified financial services company, as well as a bank holding company and a financial holding company. SVB Financial was incorporated in the state of Delaware in March 1999. Through our various subsidiaries and divisions, we offer a variety of banking and financial products and services to support our clients of all sizes and stages throughout their life cycles. In these notes to our consolidated financial statements, when we refer to “SVB Financial Group,” “SVBFG”, the “Company,” “we,” “our,” “us” or use similar words, we mean SVB Financial Group and all of its subsidiaries collectively, including Silicon Valley Bank (the “Bank”), unless the context requires otherwise. When we refer to “SVB Financial” or the “Parent” we are referring only to the parent company, SVB Financial Group (not including subsidiaries).
The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal and recurring nature that are, in the opinion of management, necessary to fairly present our financial position, results of operations and cash flows in accordance with GAAP. Such unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three and nine months ended September 30, 2017 are not necessarily indicative of results to be expected for any future periods. These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 (“ 2016 Form 10-K”).
The accompanying unaudited interim consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Consolidated Financial Statements and Supplementary Data—Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2016 Form 10-K.
The preparation of unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates may change as new information is obtained. Significant items that are subject to such estimates include measurements of fair value, the valuation of non-marketable securities, the valuation of equity warrant assets, the adequacy of the allowance for loan losses and allowance for unfunded credit commitments, and the recognition and measurement of income tax assets and liabilities.
Principles of Consolidation and Presentation
Our consolidated financial statements include the accounts of SVB Financial Group and consolidated entities. We consolidate voting entities in which we have control through voting interests or entities through which we have a controlling financial interest in a variable interest entity (“VIE”). We determine whether we have a controlling financial interest in a VIE by determining if we have: (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses, or (c) the right to receive the expected returns of the entity. Generally, we have significant variable interests if our commitments to a limited partnership investment represent a significant amount of the total commitments to the entity. We also evaluate the impact of related parties on our determination of variable interests in our consolidation conclusions. We consolidate VIEs in which we are the primary beneficiary based on a controlling financial interest. If we are not the primary beneficiary of a VIE, we record our pro-rata interests or our cost basis in the VIE, as appropriate, based on other accounting guidance within GAAP.
VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. We assess VIEs to determine if we are the primary beneficiary of a VIE.  A primary beneficiary is defined as a variable interest holder that has a controlling financial interest. A controlling financial interest requires both: (a) power to direct the activities that most significantly impact the VIE’s economic performance, and (b) obligation to absorb losses or receive benefits of a VIE that could potentially be significant to a VIE. Under this analysis, we also evaluate kick-out rights and other participating rights which could provide us a controlling financial interest. The primary beneficiary of a VIE is required to consolidate the VIE.
We also evaluate fees paid to managers of our limited partnership investments. We exclude those fee arrangements that are not deemed to be variable interests from the analysis of our interests in our investments in VIEs and the determination of a primary beneficiary, if any. Fee arrangements based on terms that are customary and commensurate with the services provided are deemed not to be variable interests and are, therefore, excluded.

9


All significant intercompany accounts and transactions with consolidated entities have been eliminated. We have not provided financial or other support during the periods presented to any VIE that we were not previously contractually required to provide.
Adoption of New Accounting Standards
In March 2016, the FASB issued a new accounting standard update (ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718)), which includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the ASU, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement in the period when the awards vest or are settled. The guidance also permits an entity to make an accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. We adopted this guidance on January 1, 2017 and elected to estimate the number of awards that are expected to vest which, is consistent with the previous accounting guidance. In addition, we also elected to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using the prospective transition method.
Previously, tax effects resulting from changes in the Company's share price subsequent to grant date of share-based compensation awards were recorded through additional paid-in capital in stockholders' equity at the time of vesting and exercise. The adoption of the amended accounting guidance resulted in a $1.3 million and $14.4 million reduction of income tax expense (that previously would have been reflected as additional paid-in capital), or a benefit of $0.02 and $0.27 per diluted common share, for the three and nine months ended September 30, 2017, respectively. We expect the impact of this amendment will vary period to period depending on the volatility of the Company's stock price and the timing of vesting and/or settlement of awards.
Recent Accounting Pronouncements
In May 2014, the FASB issued a new accounting standard update (ASU 2014-09, Revenue from Contracts with Customers (Topic 606)), which provides revenue recognition guidance that is intended to create greater consistency with respect to how and when revenue from contracts with customers is shown in the income statement. The guidance requires that revenue from contracts with customers be recognized when transfer of control over goods or services is passed to customers in the amount of consideration expected to be received . Subsequent Accounting Standard Updates have been issued clarifying the original pronouncement (ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20). The new standard and amendments will be effective January 1, 2018, either on a full retrospective approach or a modified retrospective approach. We plan to adopt the revenue guidance in the first quarter of 2018 using the modified retrospective transition approach applied to contracts which are not completed as of January 1, 2018. Upon adoption, we will recognize the cumulative-effect of adopting this guidance as an adjustment to opening retained earnings. We have conducted a comprehensive scoping exercise to determine the revenue streams that are within the scope of this guidance. The scope of this guidance explicitly excludes net interest income, including interest income earned from our loan and fixed income securities portfolios, as well as certain other noninterest income earned from our lending-, investment- and derivative-related activities. Based on our contract assessments to-date, we have not identified any material changes to the timing or the amounts of our revenue recognition. We expect minor changes in the timing of recognizing fund management fees in noninterest income for a portion of our SVB Capital funds as the fees will be recognized at the time of distribution which typically occurs later in the fund life than had been previously recognized. Based on our preliminary analysis, we expect the cumulative adjustment to retained earnings associated with this change to be from $7 million to $10 million , with an immaterial impact to our net income on an ongoing basis. We continue to evaluate the effect the guidance has on our revenue and the presentation of certain costs associated with our credit card and merchant services and whether these costs are presented in noninterest expense or offset against credit card fees in noninterest income. We currently recognize payment networks costs associated with our credit card and merchant services in noninterest expense. If we determine that the adoption of the guidance results in a change in the presentation of these costs, we estimate that this will result in approximately $10 million to $15 million of annual expenses would be netted against credit card interchange fees and reported in noninterest income instead of other noninterest expense. This change would occur on a prospective basis starting January 1, 2018 and would reduce our non-GAAP core fee income within noninterest income and also reduce noninterest expense with no impact to net income. Furthermore, we continue to evaluate the disaggregation of our significant categories of revenue within the scope of this guidance and plan to expand our qualitative disclosures of our noninterest income within the Consolidated Financial Statements upon adoption in 2018.
In January 2016, the FASB issued a new accounting standard update (ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)), which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. The adoption of the new standard will result in the elimination of cost method accounting for equity investments and will impact our nonmarketable

10


and other equity securities that are currently carried at cost. This guidance will be effective on January 1, 2018, and our equity investments measured at cost will be measured at fair value and the difference between cost and fair value at adoption date will be recorded as a cumulative-effect adjustment to opening retained earnings of the fiscal year of adoption for our cost method venture capital and private equity fund investments with readily determinable fair values. The actual adjustment to opening retained earnings will depend upon the fair value of our investments at the adoption date but based on September 30, 2017 and historical values, we expect the transition adjustment to increase capital between $110 million and $120 million on a pre-tax basis. Any subsequent changes in the fair value will be recorded as unrealized gains or losses in our consolidated statements of income. Additionally, for purposes of disclosing the fair value of loans carried at amortized cost, we are evaluating our valuation methods to determine the necessary changes to conform to an “exit price” concept as required by the standard update. Accordingly, the fair value amounts disclosed for such loans may change upon adoption.
In February 2016, the FASB issued a new accounting standard update (ASU 2016-02, Leases (Topic 842)), which will require for all operating leases the recognition of a right-of-use asset and a corresponding lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. This guidance will be effective on January 1, 2019, on a modified retrospective basis, with early adoption permitted. We plan to adopt the lease accounting guidance in the first quarter of 2019 and are currently evaluating the impact this guidance will have on our consolidated financial statements by reviewing our existing lease contracts and service contracts that may include embedded leases. We expect to recognize right-of-use assets and related lease liabilities associated predominantly with noncancelable operating leases included in the table of minimum future payments in the amount of $217 million as disclosed in Note 18 of our 2016 Form 10-K.
In June 2016, the FASB issued a new accounting standard update (ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments), which amends the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance will be effective January 1, 2020, on a modified retrospective approach, with early adoption permitted, but not before January 1, 2019. We currently have a working project team in place and subject matter experts to assist with our review of key interpretive issues and assist in the assessment of our existing credit loss forecasting models and processes against the new guidance to determine what modifications may be required. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
In August 2016, the FASB issued a new accounting standard update (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), which clarifies the guidance on eight specific cash flow issues. This guidance will be effective January 1, 2018 on a full retrospective approach, with early adoption permitted. Our preliminary evaluation has resulted in the expectation that this guidance will primarily impact the presentation between investing and operating activities within our statements of cash flows related to distributions and net gains from our nonmarketable and other securities portfolio. We are continuing to evaluate any further impact of this guidance to the presentation of our operating, investing and financing activities within our statements of cash flows.
Reclassifications
Certain prior period amounts, primarily related to the changes to our income statement presentation of net gains on derivative instruments and provision for unfunded credit commitments have been reclassified to conform to current period presentations.
2.
Stockholders’ Equity and EPS
Accumulated Other Comprehensive Income
The following table summarizes the items reclassified out of accumulated other comprehensive income into the Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2017 and 2016 :
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Dollars in thousands)
 
Income Statement Location
 
2017

2016
 
2017
 
2016
Reclassification adjustment for losses (gains) included in net income
 
Gains on investment securities, net
 
$
101

 
$
15

 
$
(384
)
 
$
(11,567
)
Related tax (benefit) expense
 
Income tax expense
 
(41
)
 
(6
)
 
157

 
4,707

Total reclassification adjustment for losses (gains) included in net income, net of tax
 
 
 
$
60

 
$
9

 
$
(227
)
 
$
(6,860
)

11


EPS
Basic EPS is the amount of earnings available to each share of common stock outstanding during the reporting period. Diluted EPS is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issuable for stock options and restricted stock units outstanding under our 2006 Equity Incentive Plan and our ESPP. Potentially dilutive common shares are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive. The following is a reconciliation of basic EPS to diluted EPS for the three and nine months ended September 30, 2017 and 2016 :
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Dollars and shares in thousands, except per share amounts)
 
2017
 
2016
 
2017
 
2016
Numerator:
 
 
 
 
 
 
 
 
Net income available to common stockholders
 
$
148,620

 
$
111,081

 
$
373,296

 
$
283,219

Denominator:
 
 
 
 
 
 
 
 
Weighted average common shares outstanding—basic
 
52,705

 
52,046

 
52,530

 
51,842

Weighted average effect of dilutive securities:
 
 
 
 
 
 
 
 
Stock options and ESPP
 
343

 
233

 
381

 
245

Restricted stock units
 
257

 
134

 
319

 
142

Weighted average common shares outstanding—diluted
 
53,305

 
52,413

 
53,230

 
52,229

Earnings per common share:
 
 
 
 
 
 
 
 
Basic
 
$
2.82

 
$
2.13

 
$
7.11

 
$
5.46

Diluted
 
$
2.79

 
$
2.12

 
$
7.01

 
$
5.42


The following table summarizes the weighted-average common shares excluded from the diluted EPS calculation due to the antidilutive effect for the three and nine months ended September 30, 2017 and 2016 :
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Shares in thousands)
 
2017
 
2016
 
2017
 
2016
Stock options
 
112

 
518

 
61

 
444

Restricted stock units
 
5

 
120

 
2

 
9

Total
 
117

 
638

 
63

 
453

3.
Share-Based Compensation
For the three and nine months ended September 30, 2017 and 2016 , we recorded share-based compensation and related tax benefits as follows:  
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Dollars in thousands)
 
2017
 
2016
 
2017
 
2016
Share-based compensation expense
 
$
8,644

 
$
7,916

 
$
27,739

 
$
22,342

Income tax benefit related to share-based compensation expense
 
(3,154
)
 
(2,881
)
 
(9,518
)
 
(7,461
)
Unrecognized Compensation Expense
As of September 30, 2017 , unrecognized share-based compensation expense was as follows:
(Dollars in thousands)
 
  Unrecognized  
Expense
 
Weighted Average
Expected
Recognition
  Period - in Years  
Stock options
 
$
10,935

 
2.72
Restricted stock units
 
56,513

 
2.74
Total unrecognized share-based compensation expense
 
$
67,448

 
 

12


Share-Based Payment Award Activity
The table below provides stock option information related to the 2006 Equity Incentive Plan for the nine months ended September 30, 2017 :
 
 
Options
 
Weighted
Average
 Exercise Price 
 
Weighted Average Remaining Contractual Life - in Years  
 
Aggregate
  Intrinsic Value  
of In-The-
Money
Options
Outstanding at December 31, 2016
 
1,010,557

 
$
87.24

 
 
 
 
Granted
 
113,535

 
178.23

 
 
 
 
Exercised
 
(232,370
)
 
70.79

 
 
 
 
Forfeited
 
(9,491
)
 
111.48

 
 
 
 
Outstanding at September 30, 2017
 
882,231

 
103.02

 
3.80
 
$
74,172,891

Vested and expected to vest at September 30, 2017
 
857,176

 
101.94

 
3.74
 
72,987,562

Exercisable at September 30, 2017
 
533,847

 
83.46

 
2.73
 
55,323,524

The aggregate intrinsic value of outstanding options shown in the table above represents the pre-tax intrinsic value based on our closing stock price of $187.09 as of September 30, 2017 . The total intrinsic value of options exercised during the three and nine months ended September 30, 2017 was $3.8 million and $25.8 million , compared to $1.5 million and $8.2 million for the comparable 2016 periods, respectively.
The table below provides information for restricted stock units under the 2006 Equity Incentive Plan for the nine months ended September 30, 2017 :
 
 
Shares    
 
Weighted Average Grant Date Fair Value
Nonvested at December 31, 2016
 
670,969

 
$
106.64

Granted
 
239,847

 
180.05

Vested
 
(223,561
)
 
102.00

Forfeited
 
(38,871
)
 
122.77

Nonvested at September 30, 2017
 
648,384

 
134.43

4.
Variable Interest Entities
Our involvement with VIEs includes our investments in venture capital and private equity funds, debt funds, private and public portfolio companies and our investments in qualified affordable housing projects.

13


The following table presents the carrying amounts and classification of significant variable interests in consolidated and unconsolidated VIEs as of September 30, 2017 and December 31, 2016 :
(Dollars in thousands)
 
Consolidated VIEs
 
Unconsolidated VIEs
 
Maximum Exposure to Loss in Unconsolidated VIEs
September 30, 2017:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
7,555

 
$

 
$

Non-marketable and other securities (1)
 
190,129

 
323,284

 
323,284

Accrued interest receivable and other assets
 
169

 

 

Total assets
 
$
197,853

 
$
323,284

 
$
323,284

Liabilities:
 
 
 
 
 
 
Other liabilities (1)
 
445

 
90,974

 

Total liabilities
 
$
445

 
$
90,974

 
$

December 31, 2016:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
11,469

 
$

 
$

Non-marketable and other securities (1)
 
196,140

 
314,810

 
314,810

Accrued interest receivable and other assets
 
294

 

 

Total assets
 
$
207,903

 
$
314,810

 
$
314,810

Liabilities:
 
 
 
 
 
 
Other liabilities (1)
 
517

 
58,095

 

Total liabilities
 
$
517

 
$
58,095

 
$

 
 
(1)
Included in our unconsolidated non-marketable and other securities portfolio at September 30, 2017 and December 31, 2016 are investments in qualified affordable housing projects of $148.0 million and $112.4 million , respectively, and related other liabilities consisting of unfunded credit commitments of $91.0 million and $58.1 million , respectively.

Non-marketable and other securities
Our non-marketable and other securities portfolio primarily represents investments in venture capital and private equity funds, SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China (“SPD-SVB”)), debt funds, private and public portfolio companies and investments in qualified affordable housing projects. A majority of these investments are through third party funds held by SVB Financial in which we do not have controlling or significant variable interests. These investments represent our unconsolidated VIEs in the table above. Our non-marketable and other securities portfolio also includes investments from SVB Capital. SVB Capital is the funds management business of SVB Financial Group, which focuses primarily on venture capital investments. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. We have a controlling and significant variable interest in four of these SVB Capital funds and consolidate these funds for financial reporting purposes.
All investments are generally nonredeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreement. Subject to applicable regulatory requirements, including the Volcker Rule, we also make commitments to invest in venture capital and private equity funds. For additional details, see Note 12—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report .
The Bank also has variable interests in low income housing tax credit funds, in connection with fulfilling its responsibilities under the Community Reinvestment Act (“CRA”), that are designed to generate a return primarily through the realization of federal tax credits. These investments are typically limited partnerships in which the general partner, other than the Bank, holds the power over significant activities of the VIE; therefore, these investments are not consolidated. For additional information on our investments in qualified affordable housing projects see Note 6—“Investment Securities" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report .

14


As of September 30, 2017 , our exposure to loss with respect to the consolidated VIEs is limited to our net assets of $197.4 million and our exposure to loss for our unconsolidated VIEs is equal to our investment in these assets of $323.3 million .
5.
Cash and Cash Equivalents
The following table details our cash and cash equivalents at September 30, 2017 and December 31, 2016 :
(Dollars in thousands)
 
September 30, 2017

December 31, 2016
Cash and due from banks (1)
 
$
3,490,005

 
$
2,476,588

Securities purchased under agreements to resell (2)
 
62,664

 
64,028

Other short-term investment securities
 
2,902

 
5,134

Total cash and cash equivalents
 
$
3,555,571

 
$
2,545,750

 
 
(1)
At September 30, 2017 and December 31, 2016 , $1.6 billion and $1.1 billion , respectively, of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $1.2 billion and $721 million , respectively.
(2)
At September 30, 2017 and December 31, 2016 , securities purchased und er agreements to resell were collateralized by U.S. Treasury securities and U.S. agency securities with aggregate fair values of $64 million an d $66 million , respectively. None of these securities were sold or repledged as of September 30, 2017 and December 31, 2016 .
6.
Investment Securities
Our investment securities portfolio consists of: (i) an available-for-sale securities portfolio and a held-to-maturity securities portfolio, both of which represent interest-earning investment securities, and, (ii) a non-marketable and other securities portfolio, which primarily represents investments managed as part of our funds management business.
Available-for-Sale Securities
The components of our available-for-sale investment securities portfolio at September 30, 2017 and December 31, 2016 are as follows:
 
 
September 30, 2017
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Carrying
Value
Available-for-sale securities, at fair value:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
7,488,126

 
$
14,048

 
$
(3,834
)
 
$
7,498,340

U.S. agency debentures
 
1,668,403

 
9,759

 
(1,993
)
 
1,676,169

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
3,024,649

 
4,998

 
(16,952
)
 
3,012,695

Agency-issued collateralized mortgage obligations—variable rate
 
394,567

 
1,442

 
(129
)
 
395,880

Equity securities
 
8,819

 
11,893

 
(459
)
 
20,253

Total available-for-sale securities
 
$
12,584,564

 
$
42,140

 
$
(23,367
)
 
$
12,603,337


 
 
December 31, 2016
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Carrying
Value
Available-for-sale securities, at fair value:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
8,880,358

 
$
30,323

 
$
(1,190
)
 
$
8,909,491

U.S. agency debentures
 
2,065,535

 
14,443

 
(1,603
)
 
2,078,375

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
1,163,017

 
3,046

 
(13,398
)
 
1,152,665

Agency-issued collateralized mortgage obligations—variable rate
 
474,238

 
685

 
(640
)
 
474,283

Equity securities
 
5,635

 
748

 
(786
)
 
5,597

Total available-for-sale securities
 
$
12,588,783

 
$
49,245

 
$
(17,617
)
 
$
12,620,411


15


The following tables summarize our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of September 30, 2017 and December 31, 2016 :
 
 
September 30, 2017
 
 
Less than 12 months
 
12 months or longer
 
Total
(Dollars in thousands)
 
Fair Value of
Investments
 
Unrealized
Losses
 
Fair Value of
Investments
 
Unrealized
Losses
 
Fair Value of
Investments
 
Unrealized
Losses
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
2,824,370

 
$
(3,834
)
 
$

 
$

 
$
2,824,370

 
$
(3,834
)
U.S. agency debentures
 
562,392

 
(1,993
)
 

 

 
562,392

 
(1,993
)
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
1,505,319

 
(7,389
)
 
415,200

 
(9,563
)
 
1,920,519

 
(16,952
)
Agency-issued collateralized mortgage obligations—variable rate
 
6,651

 
(1
)
 
62,508

 
(128
)
 
69,159

 
(129
)
Equity securities
 
1,787

 
(459
)
 

 

 
1,787

 
(459
)
Total temporarily impaired securities (1)
 
$
4,900,519

 
$
(13,676
)
 
$
477,708

 
$
(9,691
)
 
$
5,378,227

 
$
(23,367
)
 
 
(1)
As of September 30, 2017 , we identified a total of 202 investments that were in unrealized loss positions, of which 63 investments totaling $477.7 million with unrealized losses of $9.7 million have been in an impaired position for a period of time greater than 12 months. As of September 30, 2017 , we do not intend to sell any of our impaired securities prior to recovery of our adjusted cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our adjusted cost basis. Based on our analysis as of September 30, 2017 , we deem all impairments to be temporary, and therefore changes in value for our temporarily impaired securities as of the same date are included in other comprehensive income. Market valuations and impairment analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis.
 
 
December 31, 2016
 
 
Less than 12 months
 
12 months or longer
 
Total
(Dollars in thousands)
 
Fair Value of
Investments
 
Unrealized
Losses
 
Fair Value of
Investments
 
Unrealized
Losses
 
Fair Value of
Investments
 
Unrealized
Losses
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
879,255

 
$
(1,190
)
 
$

 
$

 
$
879,255

 
$
(1,190
)
U.S. agency debentures
 
513,198

 
(1,603
)
 

 

 
513,198

 
(1,603
)
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
635,566

 
(6,704
)
 
227,480

 
(6,694
)
 
863,046

 
(13,398
)
Agency-issued collateralized mortgage obligations—variable rate
 
258,325

 
(613
)
 
6,068

 
(27
)
 
264,393

 
(640
)
Equity securities
 
3,693

 
(786
)
 

 

 
3,693

 
(786
)
Total temporarily impaired securities (1)
 
$
2,290,037

 
$
(10,896
)
 
$
233,548

 
$
(6,721
)
 
$
2,523,585

 
$
(17,617
)
 
 
(1)
As of December 31, 2016 , we identified a total of 174 investments that were in unrealized loss positions, of which 20 investments totaling $233.5 million with unrealized losses of $6.7 million have been in an impaired position for a period of time greater than 12 months.

16


The following table summarizes the fixed income securities, carried at fair value, classified as available-for-sale as of September 30, 2017 by the remaining contractual principal maturities. For U.S. Treasury securities and U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower rate environments.
 
 
September 30, 2017
(Dollars in thousands)
 
Total
 
One Year
or Less
 
After One
Year to
Five Years
 
After Five
Years to
Ten Years
 
After
Ten Years
U.S. Treasury securities
 
$
7,498,340

 
$
2,592,486

 
$
4,905,854

 
$

 
$

U.S. agency debentures
 
1,676,169

 
314,852

 
1,361,317

 

 

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations fixed rate
 
3,012,695

 

 

 
487,285

 
2,525,410

Agency-issued collateralized mortgage obligations variable rate
 
395,880

 

 

 

 
395,880

Total
 
$
12,583,084

 
$
2,907,338

 
$
6,267,171

 
$
487,285

 
$
2,921,290

Held-to-Maturity Securities

The components of our held-to-maturity investment securities portfolio at September 30, 2017 and December 31, 2016 are as follows:
 
 
September 30, 2017
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
Held-to-maturity securities, at cost:
 
 
 
 
 
 
 
 
U.S. agency debentures (1)
 
$
660,193

 
$
6,775

 
$
(1,080
)
 
$
665,888

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued mortgage-backed securities
 
5,164,701

 
15,764

 
(17,116
)
 
5,163,349

Agency-issued collateralized mortgage obligations—fixed rate
 
3,025,421

 
707

 
(27,268
)
 
2,998,860

Agency-issued collateralized mortgage obligations—variable rate